Macy's restructuring to focus on digital

Department store chain Macy's will close 68 of its 880 store locations as part of a company-wide restructuring that will shift more resources to its online efforts, ZDNet reports.

Altogether, the restructuring will cut 10,000 employees and pour $550 million in funding into its digital businesses.

The company said that it saw double-digit annual revenue growth from both its macys.com and bloomingdales.com sites in 2016. To help fuel further growth, the company will inject more capital into initiatives around mobile commerce, marketing data and analytics, and in-store pickup options for online orders. Macy's previously said that it would close 100 store locations to shift more resources to its digital channels and its highest-performing store locations. The 68 closings are part of the 100 closures announced this past summer.

While online sales at Macy's have grown, foot traffic at its retail stores has steadily declined in recent years, hindering its top line. This problem has hit other legacy brick-and-mortar retailers hard as well, as they struggle to build out digital operations that are strong enough to mitigate the decline in in-store shopping.

The company's sales during November and December of 2016 fell by 2.7%, compared with the same period in 2015, according to a company press release.

Kohl's said that its revenue during November and December last year declined by 2.1%, compared with 2015.

Meanwhile, online retail sales during the months of November and December 2016 totaled $91.7 billion, up 11% from the previous year, according to data from Adobe.

Although legacy retailers are seeing growth in their online sales, they are still far behind the clear e-commerce market leader, Amazon, which had its best holiday shopping season ever in 2016.

Legacy retailers have been desperately trying to catch up with Amazon's lead in online retail, both by increasing investment in their own online stores and with attempts to better leverage technology in their retail locations. For its part, Macy's has invested in in-store beacons and digital in-store payments options, while also recently expanding its e-commerce efforts to China. The ongoing shift in focus toward digital channels comes with a high cost for legacy retailers — Macy's said that it expects to lose $575 million in sales this year because of the 68 store closings — but investing sufficiently in a digital presence is no longer optional as the e-commerce market grows larger.

E-commerce has been on the rise in the last several years, thanks in large part to titans in the industry such as Amazon and Alibaba. E-commerce will truly become the future of retail, as nearly all of the growth in the retail sector now takes place in the digital space.

BI Intelligence, Business Insider's premium research service, forecasts that U.S. consumers will spend $385 billion online in 2016. Moreover, BI Intelligence predicts that number will grow to $632 billion in 2020.

This is hardly surprising considering e-commerce's healthy growth. Though the U.S. retail average growth rate in the first half of 2016 was just 2% for total retail, it was 16% for e-commerce.

The number of online shoppers has grown by nearly 20 million from 2015 to 2016. And these 224 million shoppers are spending more, as the total amount spent online grew from $61 billion in the first quarter of 2015 to $68 billion in Q1 2016. Finally, these customers are transacting more frequently, as the number of online transactions has risen by 115 million from 2015 to 2016.

But all of this shopping online creates its own set of challenges, both for consumers and the companies that are trying to get their products onto shoppers' screens and into their shopping carts. In short, you need a plan.

And to create your ultimate e-commerce battle plan, you need the right intel.

BI Intelligence is here to help.

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